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Joint Stock Company “The State Export-Import Bank of Ukraine”

Interim condensed consolidated financial statements For the nine months ended 30 September 2019

Joint Stock Company “The State Export-Import Bank of Ukraine” Interim condensed consolidated financial statements

CONTENTS

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Interim condensed consolidated statement of financial position (Consolidated balance sheet) ...................................................... 1 Interim condensed consolidated statement of profit and loss (Consolidated income statement) ................................................... 2 Interim condensed consolidated statement of comprehensive income ................................................................................................ 3 Interim condensed consolidated statement of changes in equity (Consolidated statement of equity) ............................................ 4 Interim condensed consolidated statement of cash flows (direct method) .......................................................................................... 5

SELECTED NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL

STATEMENTS 1. Principal activities ...................................................................................................................................................... 6 2. Basis of preparation and summary of accounting policies ......................................................................................... 6 3. Segment information ................................................................................................................................................ 10 4. Cash and cash equivalents ........................................................................................................................................ 13 5. Changes in liabilities in financial activities .............................................................................................................. 13 6. Expenses for expected credit losses .......................................................................................................................... 13 7. Amounts due from credit institutions ....................................................................................................................... 15 8. Loans to customers ................................................................................................................................................... 17 9. Investment securities ................................................................................................................................................ 23 10. Other assets and liabilities ........................................................................................................................................ 24 11. Amounts due to credit institutions ............................................................................................................................ 27 12. Amounts due to customers ....................................................................................................................................... 27 13. Eurobonds issued ...................................................................................................................................................... 27 14. Equity ....................................................................................................................................................................... 28 15. Credit-related commitments ..................................................................................................................................... 28 16. Personnel and other operating expenses ................................................................................................................... 34 17. Fair value of assets and liabilities ............................................................................................................................. 34 18. Related party disclosures .......................................................................................................................................... 37 19. Capital adequacy ...................................................................................................................................................... 39 20. Events after the reporting date .................................................................................................................................. 40


INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONSOLIDATED BALANCE SHEET)

As at 30 September 2019

(thousands of Ukrainian hryvnia)

Selected notes on pages 6-40 form an integral part of these interim condensed consolidated financial statements 1

Notes

30 September 2019 (unaudited) 31 December 2018

Assets Cash and cash equivalents 4 26,617,536 18,545,858

Amounts due from credit institutions 7 278,347 569,890 Loans to customers 8 62,842,960 72,496,358 Investment securities: 9

- at fair value through profit or loss

25,398,723 26,653,561 - at fair value through other comprehensive income

22,416,234 35,789,095

- at amortised cost

− 49,855 Tax assets

246,870 161,080

Investment property

1,153,243 1,153,243 Property and equipment

1,632,621 1,646,109

Intangible assets

47,398 54,266 Deferred income tax asset

2,033,021 2,033,021

Non-current assets held for sale

39,614 39,614

Other assets 10 519,725 2,451,523

Total assets

143,226,292 161,643,473

Liabilities

Amounts due to credit institutions 11 22,939,955 24,405,913 Amounts due to customers 12 78,596,329 82,163,124 Eurobonds issued 13 28,105,954 42,541,905 Subordinated debt

3,045,476 3,584,690

Provision for credit-related commitments 15 124,472 72,625

Other liabilities 10 420,412 423,623

Total liabilities

133,232,598 153,191,880

Equity 14

Share capital

38,730,042 38,730,042 Revaluation reserves

(793,359) (816,406)

Result from transactions with the shareholder

635,104 635,104 Accumulated deficit

(28,741,019) (30,260,073)

Reserve and other funds

162,926 162,926

Total equity

9,993,694 8,451,593

Total equity and liabilities

143,226,292 161,643,473

Authorised for release and signed 20 November 2019 Chairman of the Board O.V. Hrytsenko Chief Accountant N.A. Potemska V.M. Medko 247-89-16


INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT AND LOSS (CONSOLIDATED

INCOME STATEMENT)

For the nine months ended 30 September 2019



Notes

2019 2018 For the three

months ended 30 September

For the nine months ended

30 September

For the three months ended 30 September

For the nine months ended 30 September

(unaudited) Interest income

Interest income calculated using effective interest rate - loans to customers

2,071,634 6,217,913 2,054,997 5,556,523 - investment securities at fair value through other

comprehensive income

536,616 1,865,886 718,060 2,231,213

- investment securities at amortised cost

293 2,724 2,414 8,903

- amounts due from credit institutions

87,867 250,183 29,579 123,643 Other interest income

- investment securities at fair value through profit or loss

309,110 917,215 309,113 917,225

3,005,520 9,253,921 3,114,163 8,837,507

Interest expense Amounts due to customers

(1,072,294) (3,475,533) (960,761) (2,807,823)

Eurobonds issued

(769,531) (2,707,170) (1,098,101) (3,075,896)

Amounts due to credit institutions

(361,526) (1,098,788) (398,763) (1,026,677)

Subordinated debt

(73,744) (237,802) (81,800) (230,743)

Other interest expenses

(356) (1,216) − −

(2,277,451) (7,520,509) (2,539,425) (7,141,139)

Net interest income

728,069 1,733,412 574,738 1,696,368

Net gains/(losses) from modification of financial assets measured at amortised cost

176,281 (46,643) (57,816) (565,893)

(Expenses)/reversal of expenses for expected credit losses 6 (475,293) (1,131,643) 993,765 1,554,660

Expenses for expected credit losses on credit-related commitments 6 (75,204) (56,338) (14,920) (43,570)

Commission income

282,114 812,746 258,521 725,263

Commission expense

(112,618) (323,982) (97,139) (264,897) Net (losses)/gains on investment securities at fair

value through profit or loss

(784,925) (1,039,093) 764,805 (1,281,437) Net losses on investment securities at fair value

through other comprehensive income reclassified from other comprehensive income at redemption

(7,383) (7,208) (7,979) (50,083)

Net gains/(losses) from foreign currencies - dealing

149,803 400,379 146,043 302,604

- translation differences

2,098,447 3,558,910 (2,094,625) (34,537) Net gains/(losses) from precious metals

- dealing

5 94 1 193

- revaluation

(305) 576 152 (676)

Other income

25,411 81,542 94,517 146,328

Personnel expenses 16 (389,445) (1,074,548) (326,605) (917,069)

Depreciation and amortisation

(27,843) (84,784) (24,978) (74,032)

Other operating expenses 16 (180,155) (547,176) (181,812) (517,754)

Profit before tax

1,406,959 2,276,244 26,668 675,468

Income tax expense

(13) (48) − (4)

Profit for the period

1,406,946 2,276,196 26,668 675 464

Authorised for release and signed

20 November 2019

Chairman of the Board O.V. Hrytsenko

Chief Accountant

N.A. Potemska V.M. Medko 247-89-16


INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME




2019 2018


For the nine months ended

30 September



(unaudited)

Profit for the period 1,406,946 2,276,196 26,668 675,464

Other comprehensive income/(loss) Other comprehensive income/(loss) to be

reclassified to the consolidated statement of profit and loss (the consolidated income statement) in subsequent periods

Net gains/(losses) on investment securities at fair value through other comprehensive income 491,138 32,975 (209,210) (929,750)

Income tax related to components of other comprehensive income – – – –

Other comprehensive income/(loss)for the period 491,138 32,975 (209,210) (929,750)

Total comprehensive income/(loss) for the period 1,898,084 2,309,171 (182,542) (254,286)



INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONSOLIDATED

STATEMENT OF EQUITY)




Share capital Revaluation

reserve

Result from transactions

with the shareholder

Accumulated deficit

Reserve and other funds Total equity

At 1 January 2018 38,730,042 211,783 635,104 (30,506,072) 162,926 9,233,783

Profit for the year – – – 675,464 – 675,464 Other comprehensive loss for the

period – (929,750) – – – (929,750)

Total comprehensive loss for the period – (929,750) – 675,464 – (254,286)

Depreciation of revaluation

reserve, net of tax (Note 14) – (9,948) – 9,948 – – Profit distributed for payment of

dividends (Note 14) – – – (588,033) – (588,033)

At 30 September 2018 (unaudited) 38,730,042 (727,915) 635,104 (30,408,693) 162,926 8,391,464

At 31 December 2018 38,730,042 (816,406) 635,104 (30,260,073) 162,926 8,451,593

Profit for the year – – – 2,276,196 – 2,276,196 Other comprehensive loss for the

period (Note 14) – 32,975 – – – 32,975

Total comprehensive income for the period – 32,975 – 2,276,196 – 2,309,171

Depreciation of revaluation

reserve, net of tax (Note 14) – (9,928) – 9,928 – – Profit distributed for payment of

dividends – – – (767,070) – (767,070)

At 30 September 2019 (unaudited) 38,730,042 (793,359) 635,104 (28,741,019) 162,926 9,993,694



INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONSOLIDATED

STATEMENT OF EQUITY)




Notes

For the period ended 30 September

2019 2018 (unaudited)

Cash flows from operating activities Interest received 8,126,084 8,174,432 Interest paid (7,664,555) (6,609,784) Commissions received 841,864 680,161 Commissions paid (323,982) (264,620) Result from dealing in foreign currencies and precious metals 400,473 302,797 Personnel expenses paid (1,118,371) (944,164) Other operating income received 81,152 90,138

Other operating and administrative expenses paid (530,583) (491,433)

Cash flow from operating activities before changes in operating assets and liabilities (187,918) 937,527

Net (increase)/decrease in operating assets: Amounts due from credit institutions 247,967 59,593 Loans to customers 4,257,325 (6,448,781) Other assets 343,835 (3,723,808) Net increase / (decrease) in operating liabilities Amounts due to credit institutions (469,810) (173,517) Amounts due to the National Bank of Ukraine – (2,418) Amounts due to customers 4,254,462 (4,581,734)

Other liabilities (255,854) 56,872

Net cash flows from operating activities before income tax 8,190,007 (13,876,266) Income tax paid in advance (138,128) (105,880)

Net cash flows from operating activities 8,051,879 (13,982,146)

Cash flows from investing activities Proceeds from sale and redemption of investment securities 21,538,376 28,880,421 Purchase of investment securities (10,022,195) (22,543,923) Dividends received 394 560 Purchases of property, equipment and intangible assets (53,405) (45,796)

Net cash flows from investing activities 11,463,170 6,291,262

Cash flows from financing activities Part of profit allocated for payment of dividends (767,070) (588,033) Lease payments 5 (3,753) – Proceeds from Eurobonds issued 5 – 4,020,167 Repayment of Eurobonds issued 5 (10,177,147) – Proceeds from borrowings from credit institutions 5 4,885,082 1,421,015

Repayment of borrowings from credit institutions 5 (3,002,439) (3,092,674)

Net cash flows from financing activities (9,065,327) 1,760,475

Effect of exchange rates changes on cash and cash equivalents (2,372,731) (40,907)

Effect of expected credit losses on cash and cash equivalents (5,313) (6,066)

Net change in cash and cash equivalents 8,071,678 (5,977,382) Cash and cash equivalents, 1 January 18,545,858 19,866,217

Cash and cash equivalents, 30 September 4 26,617,536 13,888,835

Authorised for release and signed

20 November 2019

Chairman of the Board O.V. Hrytsenko

Chief Accountant N.A. Potemska

V.M. Medko 247-89-16

Joint Stock Company Notes to the interim condensed consolidated financial statements “The State Export-Import Bank of Ukraine” for the nine months ended 30 September 2019

(thousands of Ukrainian hryvnia, unless otherwise stated)

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1. Principal activities Joint Stock Company “The State Export-Import Bank of Ukraine” (hereinafter – “UkrEximBank”) was founded in 1992. UkrEximBank operates under banking licence No. 2 dated 5 October 2011. As at 30 September 2019 and 31 December 2018, 100% of UkrEximBank’s shares were owned by the Cabinet Ministers of Ukraine on behalf of the State of Ukraine. UkrEximBank’s head office is located in Kyiv at 127 Antonovycha Str. It has 22 branches and 39 operating outlets (31 December 2018: 22 branches and 39 operating outlets) and two representative offices located in London and New-York. UkrEximBank and its branches form a single legal entity. Traditionally, the main focus of UkrEximBank’s operations was the servicing of various export-import transactions. Currently, UkrEximBank’s customer base is diversified and includes a number of large industrial and state-owned enterprises. UkrEximBank accepts deposits from entities and individuals, issues loans, transfers payments in Ukraine and internationally, exchanges currencies, makes investments, provides cash and settlements, and renders other banking services to its customers. One of UkrEximBank`s main activities is to facilitate, on behalf of the Ukrainian Government, the administration of loan agreements entered into by the Ukrainian Government with other foreign governments. UkrEximBank acts as an agent, on behalf of the Ukrainian Government, with respect to loans from foreign financial institutions based on the aforementioned agreements. The Bank’s aim (in accordance with the Charter) is to create favorable conditions for the economic development and support of the domestic producers, to service export and import operations, to provide credit and financial support of restructuring processes, to strengthen and implement the industrial and trade potential of the industries and manufacturers that are export-oriented or carry out the activities related to the production of import-substituting products, and also to receive gains in favor of the Bank and its shareholder. UkrEximBank prepares separate interim condensed financial statements and interim condensed consolidated financial statements that comprise the consolidated performance indicators of UkrEximBank and its subsidiaries “Lease Company “Ukreximleasing” and “Eximleasing” Ltd (hereinafter collectively referred to as the “Bank”). “Ukreximleasing”, UkrEximBank`s 100% owned subsidiary, was founded in 1997 and is registered and operates in Ukraine in the trading and leasing business. “Eximleasing” LLC, UkrEximBank`s 100% owned subsidiary, was founded in 2006 and registered in Ukraine, and operates in the trading and leasing business.

2. Basis of preparation and summary of accounting policies

Basis of preparation These interim condensed consolidated financial statements for the six months ended 30 September 2019 have been prepared in accordance with the International Accounting Standard 34 Interim Financial Reporting (“IAS 34”). These interim condensed consolidated financial statements do not include all information and data subject to disclosure in the annual financial statements and should be read in conjunction with the Bank’s annual consolidated financial statements as at 31 December 2018, which have been prepared in accordance with IFRS. These interim condensed consolidated financial statements are presented in thousands of Ukrainian hryvnia (“UAH”), unless otherwise indicated.

Operating environment The Ukrainian economy is open, weakly diversified and deemed to be of market status with certain characteristics of the emerging market, and it has critical dependence on world commodity prices, low levels of liquidity in the capital markets and high sensitivity to financial shocks. Under such circumstances, high risks not typical for mature markets are inherent in banking in Ukraine.

Further growth of the Ukrainian economy depends on foreign market conditions, coordinated policy and decisions of the President, Government, NBU and Verkhovna Rada, continued efficient cooperation with international financial organizations and the progress in the east of the country. Consolidation of the legislative and executive branches as a result



7

of the presidential and early parliamentary elections in Ukraine will help meet expectations of accelerating the necessary social and economic reforms. The ongoing upward trend in prices for the key goods exported by Ukraine in the I-III quarters of the current year supported by a record volume of gross harvest of early grain crops of the current year, contributed to increase of export of goods and services from Ukraine. Retention of high investment and consumer demand has resulted in the retention of high imports of goods and services. The growing deficit of foreign trade and significant payments on foreign borrowings were compensated by proceeds of currency on the financial account, including foreign capital investments in the government bonds and private transfers from abroad, which generally contributed to the strengthening of national currency and maintaining an acceptable level of international reserves in Ukraine. As at 30 September of 2019, the official UAH/USD exchange rate was UAH 24.08 to 1 US Dollar (31 December 2018: UAH 27.69 to 1 US Dollar). According to the NBU, as at 1 October 2019, the international reserves amounted to USD 21.4 billion (USD 20.8 billion as at 31 December 2018). The domestic demand growth supported by further increase in salary and in amounts of consumer lending, and international trade enhancement facilitated an upward development of most economic activities and overall recovery of the Ukrainian economy (GDP growth reported during 16 consecutive quarters). In the third quarter, according to the State Statistics Service, the GDP growth is at 4.2% against 4.6% and 2.5% based on the results of the II and I quarters, respectively. Growth drivers were sectors of the economy focused on domestic consumer demand. At the same time, the slowdown in FDI inflows and the development of capital investment led to a decrease in gross fixed capital formation. According to the State Statistics Service, in January-September of the current year, the retail trade turnover in Ukraine increased by 9.8%, the scope of construction works completed - by 20.5%, and the agricultural production - by 5.9%. According to the State Statistics Service, consumer inflation was 3.4% in January-September of the current year (until December 2018). The slowdown in inflation led to a slight softening of monetary policy, with the NBU reducing its interest rate to 16.5% three consecutive times (in April, July and September). The substantial volumes of the overdue loans with imperfect protection of creditors’ rights and respective high credit risks caused low lending activity of banks in Ukraine. At the same time, the available liquidity continues to be invested by the banking institutions in the low-risky financial instruments (mainly, the government securities and the NBU deposit certificates). Increase in volatility of the national currency exchange rate, possible deterioration of foreign trade conditions and overall macroeconomic situation may negatively affect the financial position and performance of the Bank. Upon receipt of such information, the Bank promptly revises its estimates of future cash flows and implements necessary measures to sustain the Bank’s business. Changes in accounting policies The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Bank’s annual financial statements for the year ended 31 December 2018, except for the adoption of the new Standards below effective as at 1 January 2019. The nature and the effect of these changes are disclosed below. The Bank has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective. IFRS 16 Leases IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement Contains a Lease, SIC-15 Operating Leases − Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease, became effective for annual periods beginning on or after 1 January 2019. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees – leases of ‘low-value’ assets and short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee recognises a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-of-use asset). Lessees are required to separately recognise the interest expense on the lease liability and the depreciation expense on the right-of-use asset. Lessees are also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The



8

lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset. Lessor accounting under IFRS 16 is substantially unchanged from accounting under IAS 17. Lessors continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and finance leases. The Bank applied IFRS 16 for the first time using a modified retrospective method of adoption without any effect of IFRS 16 initial application on the Bank’s retained earnings/losses. The Bank applies the standard to contracts that were previously identified as leases applying IAS 17 and IFRIC 4. The Bank elected to use the exemptions proposed by the standard on lease contracts for which the lease terms end within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low value. The adoption of IFRS 16 did not impact the Bank’s financial position and the results of the Bank’s operations. The effect of application of IFRS 16 as at 1 January 2019 is as follows:

31 December 2018 Effect of transition

to IFRS 16

1 January 2019 taking into

consideration the transition to IFRS 16

Property and equipment Property and equipment 1,646,109 – 1,646,109

Right-of-use assets – 11,316 11,316

Total property and equipment 1,646,109 11,316 1,657,425

Other assets

Other assets 2,451,523 (498) 2,451,025

Total other assets 2,451,523 (498) 2,451,025

Other liabilities Other liabilities 423,623 – 423,623

Lease liabilities – 10,818 10,818

Total other liabilities 423,623 10,818 434,441

The lease liabilities as at 1 January 2019 can be reconciled to the operating lease commitments as at 31 December 2018 as follows:

Operating lease commitments as at 31 December 2018 34,652

Weighted average incremental borrowing rate as at 1 January 2019 19% Commitments relating to short-term leases and leases of low-value assets (22,296) Payments in optional extension periods not recognised as at 31 December 2018 1,763

Effect of discounting at 1 January 2019 (3,301)

Lease liabilities as at 1 January 2019 10,818

(a) Nature of the effect of adoption of IFRS 16 The Bank has lease contracts for various items of property and equipment. Before the adoption of IFRS 16, the Bank classified each of its leases (as a lessee) at the lease commencement date as either a finance lease or an operating lease. A lease was classified as a finance lease if it transferred substantially all of the risks and rewards incidental to the ownership of the leased asset to the Bank; otherwise, it was classified as an operating lease. Finance leases were capitalised at the lease commencement date at fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments were apportioned between interest amounts and reduction of the lease liability. In an operating lease, the leased property was not capitalised and the lease payments were recognised as rent expense in profit or loss on a straight-line basis over the lease term. Any prepaid rent and accrued rent were recognised under Other assets and Other liabilities, respectively. Upon adoption of IFRS 16, the Bank applied a single recognition and measurement approach to all leases, except for short-term leases and leases of low-value assets. The standard provides specific transition requirements and practical expedients, which have been applied by the Bank.



9

Leases previously classified as finance leases As at the date of transition to IFRS 16, the Bank had no existing leases previously classified as finance leases. Leases previously classified as operating leases The Bank recognised right-of-use assets and lease liabilities for the leases previously classified as operating leases, except for short-term leases and leases of low-value assets. The right-of-use assets were recognised based on the amount equal to the lease liabilities, as adjusted for the lease payments previously recognised. Lease liabilities were recognised based on the present value of the remaining lease payments discounted using the interest rate specified in the lease contract. The Bank uses the incremental borrowing rate if the rate in the lease contract is not determinable. The Bank also applied the available practical expedients wherein it:

► Used a single discount rate to a portfolio of leases with reasonably similar characteristics;

► Applied the short-term lease exemptions to the leases with the lease term that ends within 12 months of the date of initial application;

► Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application;

► Used hindsight in determining the lease term where the contract contained options to extend the lease with the term of 12 months or less.

(b) Summary of new accounting policies Set out below are the new accounting policies of the Bank upon adoption of IFRS 16, which have been applied from the date of initial application: Right-of-use assets The Bank recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Bank is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment assessment. Lease liabilities At the commencement date of the lease, the Bank recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Bank and payments of penalties for terminating a lease, if the lease term reflects the Bank exercising the option to terminate. The variable lease payments that do not depend on an index or a rate are recognised as expense in the period, in which the event or condition that triggers the payment occurs. In calculating the present value of lease payments, the Bank uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the lease commencement date, the amount of lease liabilities is increased to reflect the accrual of interest and reduced to reflect the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment of an option to purchase the underlying asset. Short-term leases and leases of low-value assets The Bank does not recognise a contract to be a lease contract in case of short-term leases and leases of low-value underlying assets and accounts for no right-of-use assets and lease liabilities. Under such contracts, lease payments are recognised as expense on a straight-line basis over the lease term specified by the contract. A short-term lease is the lease, which as at the lease commencement date according to the lease contract has the lease term of 12 months or less, and this lease contract includes no automatic lease extension conditions, and the bank does not intend to extend the lease term specified by the contract, nor it intends to acquire the underlying asset. A low value of the



10

underlying asset is the value, which is less than the UAH equivalent of USD 5,000.00 at NBU`s official UAH/foreign currency exchange rate as at the date of completion of the appropriate lease contract. Significant judgement in determining the lease term of contracts with extension options The Bank determines the lease term following the lease term specified in the completed contract as at the date of its completion. If following the lease contract the lease term is 12 months or less as at the lease commencement date, the automatic lease extension conditions being included, and the bank intends to extend the lease term, then the lease term under such contract is determined as the term specified by the contract and increased for the extension term.

Amounts recognised in the consolidated statement of financial position and consolidated statement of profit and loss

Set out below are the carrying amounts of the Bank’s right-of-use assets and lease liabilities and the movements during the period:

Right-of-use assets Buildings/Premises Lease liabilities

At 1 January 2019 11,316 10,818 Additions 247 223 Depreciation (4,369) – Interest expense – 1,217

Payments – (4,934)

At 30 September 2019 (unaudited) 7,194 7,324

The Bank recognized UAH 10,704 thousand of rent expense on short-term leases and leases of low-value assets for the nine months ended 30 September 2019. Other standards The below new or amended standards and interpretations had no impact on the Bank`s interim condensed consolidated financial statements:

► IAS 12 Income taxes;

► IFRIC Interpretation 23 Uncertainty over Income Tax Treatment;

► Amendments to IFRS 9 Prepayment Features with Negative Compensation.

3. Segment information For management purposes, the Bank recognizes the following operating segments (business units): Retail banking Business unit that focuses on servicing retail customers on the full list of products, and

selling products that are mainly in a standardized form (as per the tariffs approved and the standard procedures) and generally do not require any individual approach to be applied.

Corporate banking Business unit that focuses on corporate customers and on selling the products that require an individual approach and are mainly offered to corporate clients.

Interbank and investments business

Business unit that focuses on providing services to participants in the financial markets (money, currency, stock, etc.) and on selling the products related to transactions in the financial markets.

The Board monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance, as explained in the table below, is measured taking into account income and expenses from other segments. Unallocated amounts include:

► income tax receivables and payables, the share of assets and costs associated with the work of the Bank's top management, i.e. personnel performing general management functions at the level of the whole Bank’s system and personnel supporting directly the work of the top management;

► the result of revaluation of an open currency position (except for the portion of the open currency position allocated by the Bank for carrying out operations on purchase/sale/conversion of cash foreign currency and precious metals



11

and conversion of non-cash foreign currency);

► the difference between inter-segment revenues and costs of all business lines, obtained as a result of transfer rates

For the purposes of segment reporting interest is split on the basis of uniform transfer rates set by the Assets and Liabilities Committee based on the borrowing rate of the Bank. During the nine months ended 30 September 2019 the Bank had revenues from transactions with a single external customer that accounted for more than 10% of the total income of the Bank, namely: UAH 2,591,970 thousand (30 September 2018: UAH 2,958,713 thousand). Revenue from transactions with this external customer is reflected in the segment “Interbank and investments business”. Analysis of the Bank`s income from banking products and services is presented in the interest income and interest expenses of the interim condensed consolidated statement of profit and loss. The following table presents income and expenses, profit and loss, as well as specific assets and liabilities of the Bank’s operating segments for the nine months ended 30 September 2019 (unaudited):

Retail banking Corporate banking

Interbank and investments

business Unallocated Total External clients

Interest income 370,404 5,850,234 3,033,283 – 9,253,921 Commission income 404,919 386,990 20,837 – 812,746 Other income 26,032 47,680 17 7,813 81,542 Net gains from modification of financial

assets measured at amortised cost 2,407 – – – 2,407 Reversal of expenses for expected credit

losses – – 1,780 263 2,043 Reversal of expenses for expected credit

losses on credit-related commitments 1,493 – 4 – 1,497 Net gains from foreign currencies 68,610 147,306 165,448 3,577,925 3,959,289 Net gains from precious metals 125 – – 559 684 Income from other segments 2,348,834 2,298,980 4,222,764 (8,870,578) –

Total income 3,222,824 8,731,190 7,444,133 (5,284,018) 14,114,129 Interest expense (1,710,805) (1,767,384) (4,042,320) – (7,520,509) Commission expense (172,859) (138,000) (12,871) (252) (323,982) Net losses on modification of financial

assets measured at amortised cost – (49,050) – – (49,050) Expenses for expected credit losses (12,278) (1,121,408) – – (1,133,686) Expenses for expected credit losses on

credit-related commitments – (57,835) – – (57,835)

Net losses on investment securities at fair value through profit or loss – – – (1,039,093) (1,039,093)

Net losses on investment securities at fair value through other comprehensive income reclassified from other comprehensive income at redemption – – - (7,208) (7,208)

Net losses from precious metals – – (14) – (14) Personnel expenses (479,229) (347,774) (73,181) (174,364) (1,074,548) Depreciation and amortisation (48,383) (26,729) (2,893) (6,779) (84,784) Other operating expenses (352,941) (107,462) (18,720) (68,053) (547,176)

Expenses from other segments (314,396) (4,960,621) (2,720,127) 7,995,144 −

Segment results 131,933 154,927 574,007 1,415,377 2,276,244 Income tax expense

(48)


2,276,196

Assets and liabilities as at 30 September 2019

Segment assets 5,211,081 62,321,399 73,214,040

140,746,520

Unallocated assets

2,479,772 2,479,772

Total assets

143,226,292

Segment liabilities 35,469,625 43,674,884 53,971,835

133,116,344

Unallocated liabilities

116,254 116,254

Total liabilities

133,232,598

Other segment information Capital expenditure (33,032) (14,172) (1,747) (4,085) (53,036)



12

The following table presents income and expenses as well as profit and loss for the nine months ended 30 September 2018 (unaudited), and specific assets and liabilities of the Bank's operating segments as at 31 December 2018:

Retail banking Corporate banking

Interbank and investments

business Unallocated Total External

Interest income 331,662 5,233,770 3,272,075 – 8,837,507 Commission income 394,459 310,624 20,180 – 725,263 Other income 21,765 45,127 66,071 13,365 146,328 Net gains from modification of financial

assets measured at amortised cost – – – 55 55

Reversal of expenses for expected credit losses – 1,582,640 76,115 – 1,658,755 Reversal of expenses for expected credit

losses on credit-related commitments 12,095 – 429 – 12,524 Net gains from foreign currencies 107,838 133,833 88,387 – 330,058 Net gains from precious metals 312 1 – – 313

Income from other segments 1,873,977 2,005,261 4,551,937 (8,431,175) –

Total income 2,742,108 9,311,256 8,075,194 (8,417,755) 11,710,803 Interest expense (1, 273,549) (1,535,641) (4,331,949) – (7,141,139) Commission expense (153,782) (105,620) (5,161) (334) (264,897) Net losses on modification of financial

assets measured at amortised cost (1,109) (564,839) – – (565,948) Expenses for expected credit losses (100,474) – – (3,621) (104,095) Expenses for expected credit losses on

credit-related commitments – (56,094) – – (56,094) Net losses on investment securities at

fair value through profit or loss – – – (1,281,437) (1,281,437) Net losses on investment securities at

fair value through other comprehensive income reclassified from other comprehensive income at redemption – – – (50,083) (50,083)

Net losses from foreign currencies – – – (61,991) (61,991)

Net losses from precious metals – – (773) (23) (796) Personnel expenses (427,330) (294,177) (66,480) (129,082) (917,069) Depreciation and amortisation (43,509) (21,458) (2,932) (6,133) (74,032) Other operating expensess (337,908) (109,016) (21,108) (49,722) (517,754)

Expenses from other segments (267,238) (4,167,985) (2,780,100) 7,215,323 –

Segment results 137,209 2,456,426 866,691 (2,784,858) 675,468

Income tax expense

(4)


675,464

Assets and liabilities as at 30 September 2018

Segment assets 5,326,389 73,785,888 80,141,547

159,253,824

Unallocated assets

2,389,649 2,389,649

Total assets

161,643,473

Segment liabilities 36,498,494 46,129,782 70,354,835

152,983,111

Unallocated liabilities

208,769 208,769

Total liabilities

153,191,880

Other segment information Capital expenditure (32,240) (15,323) (2 095) (4,381) (54,039)

Geographical information Most revenues and capital expenditure relates to Ukraine. The Bank has no significant revenue from other countries.



13

4. Cash and cash equivalents Cash and cash equivalents comprise:

30 September 2019

(unaudited) 31 December 2018

Current accounts with other credit institutions 10,583,883 8,792,208 Term deposits with other credit institutions up to 90 days 9,635,483 3,906,258 Current account with the National Bank of Ukraine 4,984,273 2,952,279 Cash on hand 1,401,169 1,159,416

Overnight deposits with other credit institutions 22,030 1,741,038

26,626,838 18,551,199

Less: allowance for expected credit losses (9,302) (5,341)

Cash and cash equivalents 26,617,536 18,545,858

5. Changes in liabilities in financial activities

Changes in liabilities in financial activities were as follows:

Borrowings from credit institutions

Eurobonds issued

Subordinated debt Lease liabilities Total

Carrying amount at 31 December 2018 22,706,497 42,541,905 3,584,690 – 68,833,092

Effect of IFRS 16 implementation – – – 10,818 10,818

Additions 4,885,082 – – 223 4,885,305 Repayments (3,002,439) (10,177,147) – (3,753) (13,183,339) Translation differences (3,119,196) (3,981,945) (460,174) – (7,561,315)

Other 255,134 (276,859) (79,040) 36 (100,729)

Carrying amount At 30 September 2019 (unaudited) 21,725,078 28,105,954 3,045,476 7,324 52,883,832

Borrowings from credit institutions

Eurobonds issued

Subordinated debt Total

Carrying amount at 31 December 2017 21,371,452 38,821,831 3,615,792 63,809,075 Additions 1,421,015 4,020,167 – 5,441,182 Repayments (3,092,674) – – (3,092,674) Translation differences 27,563 327,059 27,230 381,852

Other 235,810 122,447 (65,246) 293,011

Carrying amount as at 30 September 2018 (unaudited) 19,963,166 43,291,504 3,577,776 66,832,446

“Other” includes the effect of accrued but unpaid interest on borrowings from credit institutions, issued Eurobonds and subordinated debt and the lease liabilities. The Bank classifies the paid interest as cash flows from operating activities.

6. Expenses for expected credit losses

The following tables present the expenses/reversal of expenses for expected credit losses on financial assets recognised in profit or loss (unaudited).

Stage 1 Collective

Stage 2 Individual

Stage 2 Collective

Stage 3 Individual

Stage 3 Collective POCI Total

For the three months ended 30 September 2019

Cash and cash equivalents 35 − − − − − 35



14

Stage 1 Collective

Stage 2 Individual

Stage 2 Collective

Stage 3 Individual

Stage 3 Collective POCI Total


Amounts due from credit institutions (2,268) − − − − − (2,268)

Loans to customers (32,179) 1,773 9,764 552,622 34,948 (88,654) 478,274

Investment securities at fair value through other comprehensive income (1,446) − − − − − (1,446)

Other financial assets 698 − − − − − 698

(35,160) 1,773 9,764 552,622 34,948 (88,654) 475,293


Cash and cash equivalents 5,313 − − − − − 5,313

Amounts due from credit institutions (9,463) − − − − − (9,463)

Loans to customers (219,696) 91,724 (9,565) 1,202,488 50,437 18,122 1,133,510

Investment securities at fair value through other comprehensive income (2,492) − − − − − (2,492)

Other financial assets 4,775 − − − − − 4,775

(221,563) 91,724 (9,565) 1,202,488 50,437 18,122 1,131,643

Expenses on expected credit losses on POCI recognized in profit or loss include the amount of adjustment of the gross carrying amount of POCI in the amount of UAH 79,040 thousand.

Stage 1 Collective

Stage 2 Individual

Stage 2 Collective

Stage 3 Individual

Stage 3 Collective Total


Cash and cash equivalents 3,237 − − − − 3,237

Amounts due from credit institutions (258) − − (51,693) − (51,951)

Loans to customers 261,999 (237,956) 43,570 (923,657) (86,911) (942,955)

Investment securities at fair value through other comprehensive income (331) − − − − (331)

Other financial assets (1,765) − − − − (1,765)

262,882 (237,956) 43,570 (975,350) (86,911) (993,765)


Cash and cash equivalents 5,965 − − − − 5,965

Amounts due from credit institutions (16,012) − − (52,919) − (68,931)

Loans to customers 403,179 (338,802) 75,384 (1,644,685) 26,484 (1,478,440)

Investment securities at fair value through other comprehensive income (609) − − − − (609)

Other financial assets (12,645) − − − − (12,645)

379,878 (338,802) 75,384 (1,697,604) 26,484 (1,554,660)



15

The following tables present the expenses/(reversal) of expenses for expected credit losses on credit-related commitments recognized in profit or loss (unaudited).

Stage 1 Collective

Stage 2 Individual

Stage 2 Collective

Stage 3 Individual



Guarantees (10) − (2) − − (12)

Credit-related commitments 25,375 − 55 50,188 (223) 75,395

Letters of credit (175) − − − − (175)

Avals on promissory notes (4) − − − − (4)

25,186 − 53 50,188 (223) 75,204


Guarantees (334) − 38 − 833 537

Credit-related commitments 21,563 (8,182) 29 46,120 (2,441) 57,089

Letters of credit (1,290) − − − − (1,290)

Avals on promissory notes 2 − − − − 2

19,941 (8,182) 67 46,120 (1,608) 56,338

Stage 1 Collective

Stage 2 Individual

Stage 2 Collective



Guarantees 12 − − − 12

Credit-related commitments 44,588 (2,543) (69) (26,836) 15,140

Letters of credit (225) − − − (225)

Avals on promissory notes (7) − − − (7)

44,368 (2,543) (69) (26,836) 14,920


Guarantees 752 − − − 752

Credit-related commitments 56,905 (2,543) 841 (15,401) 39,802

Letters of credit 3,007 − − − 3,007

Avals on promissory notes 9 − − − 9

60,673 (2,543) 841 (15,401) 43,570

7. Amounts due from credit institutions Amounts due from credit institutions comprise:

30 September 2019


Loans and deposits Ukrainian banks 798,280 811,659 OECD banks 176,550 202,981

CIS and other banks 45,253 58,732

1,020,083 1,073,372 Amounts due from other credit institutions Current accounts with other credit institutions in precious metals 9,643 131,701

Other amounts due from credit institutions 77,856 210,689

1,107,582 1,415,762

Less: Allowance for impairment (829,235) (845,872)

Amounts due from credit institutions 278,347 569,890

As at 30 September 2019, amounts due from credit institutions are designated at amortised cost (31 December 2018: at amortised cost), except for current accounts in precious metals in the amount of UAH 9,643 thousand (31 December 2018: UAH 131,701 thousand) at fair value through profit or loss (31 December 2018: at fair value through profit or loss).



16

The following tables show the analysis of changes in the gross carrying amount and the corresponding ECL on amounts due from credit institutions:

Stage 1

Collective Stage 3

Individual Stage 3

Collective Total

Gross carrying amount at 1 January 2019 585,521

755,793 74,448 1,415,762

New assets originated or purchased 130,167 − − 130,167

Assets derecognized/(repaid) (226,353) − − (226,353)

Change in carrying amount (65,098) − (1) (65,099)

Reclassified to cash and cash equivalents (32,559) − − (32,559)

Translation differences (15,257) (2,553) (19) (17,829) Gross carrying amount at 30 June 2019

(unaudited) 376,421 753,240 74,428 1,204,089



Change in carrying amount (11) − − (11)

Reclassified to cash and cash equivalents (20) − − (20)

Reclassified from cash and cash equivalents 29,421 − − 29,421

Translation differences (27,806) (3,496) (32) (31,334) Gross carrying amount at 30 September 2019

(unaudited) 283,442 749,744 74,396 1,107,582

Stage 1

Collective Stage 3

Individual Stage 3

Collective Total

Gross carrying amount at 1 January 2018 618,137 893,655 74,480 1,586,272


Assets derecognized/(repaid) (38,494) − (18) (38,512)


Change in carrying amount 2,534 (1,226) − 1,308

Translation differences (54,344) (3,151) (30) (57,525) Gross carrying amount at 30 June 2018

(unaudited) 532,913 889,278 74,432 1,496,623


Change in carrying amount (71,964) − − (71,964) Translation differences 34,914 3,539 25 38,478 Gross carrying amount at 30 September 2018

(unaudited) 554,610 892,817 74,457 1,521,884

Stage 1

Collective Stage 3

Individual Stage 3

Collective Total

Allowance at 1 January 2019 15,631 755,793 74,448 845,872



Modifications in allowance (3,837) − − (3,837)

Reclassified to cash and cash equivalents (440) − − (440)

Translation differences (511) (2,553) (20) (3,084) Allowance at 30 June 2019

(unaudited) 7,925 753,240 74,428 835,593

New assets originated or purchased 110 − − 110


Modifications in allowance (1) − − (1)

Reclassified from cash and cash equivalents 422 − − 422

Translation differences (562) (3,496) (32) (4,090) Allowance at 30 September 2019 (unaudited) 5,095 749,744 74,396 829,235



17

Stage 1

Collective Stage 3

Individual Stage 3

Collective Total

Allowance at 1 January 2018 36,933 810,271 74,460 921,664




Modifications in allowance (8,947) (1,226) − (10,173)

Translation differences (2,047) (3,152) (28) (5,227) Allowance at 30 June 2018

(unaudited) 19,132 805,893 74,432 899,457

New assets originated or purchased 5,307 − − 5,307 Modifications in allowance (5,565) (51,693) − (57,258)

Translation differences 1,541 3,539 25 5,105 Allowance at 30 September 2018 (unaudited) 20,415 757,739 74,457 852,611

8. Loans to customers Loans to customers comprise:


Commercial loans 115,498,343 134,331,150 Finance lease receivables 2,503,960 1,360,897 Overdrafts 1,410,228 1,457,972

Promissory notes 58,010 74,717

119,470,541 137,224,736

Less: Allowance for impairment (56,627,581) (64,728,378)

Loans to customers at amortized cost 62,842,960 72,496,358

Loans and advances have been extended to the following types of customers:


Legal entities 92,279,455 103,567,422 State entities 25,220,771 31,594,636 Individuals 1,837,776 1,973,096

Municipal and utility entities 132,539 89,582

119,470,541 137,224,736

Commercial loans The following tables show the analysis of changes in the gross carrying amount and the corresponding allowances for commercial loans:

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective POCI Total Gross carrying amount at

1 January 2019 51,764,581 2,371,484 568,180 71,369,112 6,549,919 1,707,874 134,331,150

New assets originated or purchased 5,210,928 − − − − − 5,210,928

Assets derecognized/(repaid) (1,222,193) (10) (10,756) (137,157) (45,493) − (1,415,609)

Transfer to Stage 1 40,661 − (40,590) − (71) − −

Transfer to Stage 2 (1,267,823) 1,333,677 210,482 (276,336) − − −

Transfer to Stage 3 (271,484) − (73,736) 270,662 74,558 − −

Change in carrying amount (6,562,798) (122,633) (55,103) 1,422,085 150,396 (57,946) (5,225,999)

Translation differences (2,191,715) (118,604) (27,589) (3,043,308) (192,447) (65,840) (5 639,503)

Gross carrying amount at 30 June 2019 (unaudited) 45,500,157 3,463,914 570,888 69,605,058 6,536,862 1,584,088 127,260,967



18

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective POCI Total New assets originated or

purchased 1,668,876 − − − − 1,056,840 2,725,716

Assets derecognized/(repaid) (787,443) − (14,185) (6,645,389) (2,437) − (7,449,454)

Transfer to Stage 1 20,061 − (19,945) − (116) − −

Transfer to Stage 2 (1,177,120) 759,113 418,007 − − − −

Transfer to Stage 3 (67) (1,333,996) (70,854) 1,333,996 70,921 − −

POCI adjustment − − − − − 79,040 79,040

Change in carrying amount (730,301) (50,104) (115,544) 1,782,725 66,903 1,753 955,432

Translation differences (3,155,160) (150,424) (42,330) (4,359,761) (278,421) (87,262) (8,073,358)

Gross carrying amount at 30 September 2019 (unaudited) 41,339,003 2,688,503 726,037 61,716,629 6,393,712 2,634,459 115,498,343

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective POCI Total Gross carrying amount at

1 January 2018 46,505,346 − 503,037 74,212,985 6,846,200 − 128,067,568

New assets originated or purchased 6,788,610 − − − − 362,328 7,150,938

Assets derecognized/(repaid) (2,270,673) − (130,166) (1,539,394) (88,969) − (4,029,202)

Transfer to Stage 1 426,783 (373,180) (51,055) − (2,548) − − Transfer to Stage 2 (1,790,613) 2,249,265 204,298 (662,950) − − − Transfer to Stage 3 (93,851) − (71,414) 444 164,821 − − Change in carrying amount (1,627,308) (57,235) (34,243) 1,628,988 74,609 − (15,189)

Translation differences (2,566,425) (12,416) (20,822) (4,097,978) (249,711) − (6,947,352)

Gross carrying amount at 31 June 2018 (unaudited) 45,371,869 1,806,434 399,635 69,542,095 6,744,402 362,328 124,226,763

New assets originated or

purchased 4,244,046 − − − − 1,316,900 5,560,946

Assets derecognized/(repaid) (648,567) (11) (7,427) (1,877,415) (292,718) − (2,826,138)

Transfer to Stage 1 865 − (571) − (294) − − Transfer to Stage 2 (266,008) 1,742,703 218,773 (1,695,468) − − − Transfer to Stage 3 (140,467) − (46,841) 479,192 (291,884) − − Change in carrying amount 488,087 (64,759) (50,801) 799,214 249,552 1,938 1,423,231

Translation differences 2,920,738 150,872 33,665 4,139,329 263,635 − 7,508,239

Gross carrying amount at 30 September 2018 (unaudited) 51,970,563 3,635,239 546,433 71,386,947 6,672,693 1,681,166 135,893,041

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective POCI Total Allowance at 1 January 2019 999,187 198,347 91,661 57,110,096 6,258,715 − 64,658,006

New assets originated or purchased 132,775 − − − − − 132,775

Assets derecognized/(repaid) (20,754) − (1,166) (12,757) (27,780) − (62,457)

Transfer to Stage 1 395 − (325) − (70) − − Transfer to Stage 2 (52,999) 64,699 9,480 (21,180) − − − Transfer to Stage 3 (18,937) − (18,334) 18,488 18,783 − − Interest income adjustment − − − 1,175,049 131,200 − 1,306,249

Recoveries − − − 72,056 8,051 − 80,107

Changes in allowance (312,956) 89,951 (17,223) 665,490 43,165 106,776 575,203

Translation differences (44,300) (7,260) (4,391) (2,502,487) (186,481) − (2,744,919)

Allowance at 30 June 2019 (unaudited) 682,411 345,737 59,702 56,504,755 6,245,583 106,776 63,944,964


purchased 31,545 − − − − − 31,545

Assets derecognized/(repaid) (13,523) − (632) (567,964) (1,259) − (583,378)

Transfer to Stage 1 1,642 − (1,527) − (115) − − Transfer to Stage 2 (14,482) (3,725) 18,207 − − − − Transfer to Stage 3 (67) (104,626) (4,597) 104,626 4,664 − − Transfer to POCI − − − (4,544,771) − − (4,544,771)

Interest income adjustment − − − 418,700 50,410 1,199 470,309

Recoveries − − − 7,017 840 − 7,857

Changes in allowance (53,967) 1,773 11,496 1,120,586 36,218 (9,614) 1,106,492

Translation differences (50,413) (17,866) (4,730) (3,538,934) (268,060) (7,883) (3,887,886)



19

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective POCI Total Allowance at 30 September 2019 (unaudited) 583,146 221,293 77,919 49,504,015 6,068,281 90,478 56,545,132

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective Total Allowance at 1 January 2018 1,043,848 − 39,958 58,421,343 6,329,729 65,834,878

New assets originated or purchased 173,078 − − − − 173,078

Assets derecognized/(repaid) (45,846) − (2,834) (125,710) (50,255) (224,645)

Transfer to Stage 1 14,098 (11,179) (1,018) − (1,901) −

Transfer to Stage 2 (184,465) 294,719 3,833 (114,087) − −

Transfer to Stage 3 (38,917) − (26,000) 186 64,731 −

Transfer to POCI − − − (972,929) − (972,929)

Interest income adjustment − − − 1,402,381 159,722 1,562,103

Recoveries − − − 18,456 2,158 20,614

Changes in allowance (4,126) (99,532) 34,110 (595,318) 164,337 (500,529)

Translation differences (53,650) (2,175) (1,747) (3,223,872) (268,312) (3,549,756)

Allowance at 30 June 2018 (unaudited) 904,020 181,833 46,302 54,810,450 6,400,209 62,342,814

New assets originated or purchased 278,918 − − − − 278,918

Assets derecognized/(repaid) (14,176) (1) (146) (160,623) (226,868) (401,814)

Transfer to Stage 1 326 − (32) − (294) −

Transfer to Stage 2 (8,530) 279,236 6,832 (277,538) − −

Transfer to Stage 3 (102,871) − (12,900) 479,192 (363,421) −

Transfer to POCI − − − (604,574) − (604,574)

Interest income adjustment − − − 675,692 74,755 750,447

Recoveries − − − 3,553 393 3,946

Changes in allowance (4,228) (233,475) 43,263 (763,034) 139,001 (818,473)

Translation differences 56,581 16,569 2,376 3,341,252 263,933 3,680,711

Allowance at 30 September 2018 (unaudited) 1,110,040 244,162 85,695 57,504,370 6,287,708 65,231,975

Overdrafts The following tables show the analysis of changes in the gross carrying amount and the corresponding provisions for overdrafts:

Stage 1

Collective Stage 2

Collective Stage 3

Individual Stage 3

Collective Total Gross carrying amount at

1 January 2019 1,384,401 12,278 60,969 324 1,457,972

New assets originated or purchased 432,938 − − − 432,938

Assets derecognized/(repaid) (588,484) (27,002) (58,463) (2) (673,951)

Transfer to Stage 1 541 (541) − − −

Transfer to Stage 2 (31,936) 31,936 − − −

Transfer to Stage 3 (676) − 676 − −

Change in carrying amount (100,157) (5,562) (3,182) 142 (108,759)

Translation differences (5,881) − − − (5,881)

Gross carrying amount at 30 June 2019 (unaudited) 1,090,746 11,109 − 464 1,102,319


purchased 205,165 − − − 205,165

Assets derecognized/(repaid) (198,204) (691) − (13) (198,908)

Transfer to Stage 2 (1,282) 1,282 − − −

Change in carrying amount 314,943 (4,996) − − 309,947

Translation differences (8,295) − − − (8,295)

Gross carrying amount at 30 September 2019 (unaudited) 1,403,073 6,704 − 451 1,410,228



20

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Collective Total Gross carrying amount at 1 January 2018 708,479 − 1,107 19 709,605

New assets originated or purchased 665,807 − − − 665,807

Assets derecognized/(repaid) (280,372) − (1,107) − (281,479)

Transfer to Stage 1 39,708 (39,708) − − −

Transfer to Stage 2 (102,097) 94,412 7,685 − −

Transfer to Stage 3 (40,213) − (11) 40,224 −

Change in carrying amount 82,279 5,015 (4,971) (40,128) 42,195

Gross carrying amount at 30 June 2018 (unaudited) 1,073,591 59,719 2,703 115 1,136,128


purchased 271,905 − − − 271,905

Assets derecognized/(repaid) (229,010) − − − (229,010)

Transfer to Stage 1 (5,740) − 5,740 − −

Transfer to Stage 2 − − (2,397) 2,397 −

Transfer to Stage 3 18,545 (264) (690) 117 17,708

Change in carrying amount 6,324 − − − 6,324

Gross carrying amount at 30 September 2018 (unaudited) 1,135,615 59,455 5,356 2,629 1,203,055

Stage 1 Collective

Stage 2 Collective

Stage 3 Individual


Allowance at 1 January 2019 31,442 458 2,817 249 34,966 New assets originated or purchased 11,753 − − − 11,753 Assets derecognized/(repaid) (14,666) (2,057) (4,959) (1) (21,683) Transfer to Stage 1 4 (4) − − − Transfer to Stage 2 (1,691) 1,691 − − − Transfer to Stage 3 (50) − 50 − − Modifications in allowance (3,672) 1,117 2,092 105 (358)

Translation differences (158) (1) − − (159)

Allowance at 30 June 2019 (unaudited) 22,962 1,204 − 353 24,519

New assets originated or purchased 4,149 − − − 4,149 Assets derecognized/(repaid) (4,454) (7) − (11) (4,472) Transfer to Stage 2 (10) 10 − − − Modifications in allowance 6,463 (1,093) − − 5,370

Translation differences (134) − − − (134)

Allowance at 30 June 2019 (unaudited) 28,976 114 − 342 29,432

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Collective Total Allowance at 1 January 2018 23 632 − 68 15 23,715 New assets originated or purchased 19,119 − − − 19,119 Assets derecognized/(repaid) (6,064) − (68) − (6,132) Transfer to Stage 1 1,569 (1,569) − − − Transfer to Stage 2 (9,516) 9,472 44 − − Transfer to Stage 3 (762) − (4) 766 −

Modifications in allowance 5,974 (1,314) 606 (687) 4,579

Allowance at 30 June 2018 (unaudited) 33,952 6,589 646 94 41,281

New assets originated or purchased 7,442 − − − 7,442 Assets derecognized/(repaid) (5,608) − − − (5,608) Transfer to Stage 2 (423) − 423 − − Transfer to Stage 3 − − (646) 646 − Modifications in allowance (378) (4,480) 453 956 (3,449)

Translation differences 174 − − − 174

Allowance at 30 September 2018 (unaudited) 35,159 2,109 876 1696 39,840



21

Finance lease receivables The following tables show the analysis of changes in the gross carrying amount and the corresponding ECL on finance lease receivables:

Stage 1

Collective Stage 3

Individual Total

Gross carrying amount at 1 January 2019 1,356,252 4,645 1,360,897

Change in carrying amount 1,246,007 – 1,246,007

Gross carrying amount at 30 June 2019 (unaudited) 2,602,259 4,645 2,606,904

Change in carrying amount (102,944) – (102,944)

Gross carrying amount at 30 September 2019 (unaudited) 2,499,315 4,645 2,503,960

Stage 1

Collective Stage 3

Individual Total Gross carrying amount at 1 January 2018 62,654 4,645 67,299 New assets originated or purchased 2,291 – 2,291 Assets derecognized/(repaid) (51,674) – (51,674)


Gross carrying amount at 30 June 2018 (unaudited) 10,215 4,645 14,860

Assets derecognized/(repaid) (734) – (734)


Gross carrying amount at 30 September 2018 (unaudited) 8,158 4,645 12,803

Stage 1

Collective Stage 3

Individual Total

Allowance at 1 January 2019 29,798 4,645 34,443

Changes in allowance 20,086 – 20,086

Allowance at 30 June 2019 (unaudited) 49,884 4,645 54,529

Changes in allowance (2,294) – (2,294)

Allowance at 30 September 2019 (unaudited) 47,590 4,645 52,235

Stage 1

Collective Stage 3

Individual Total

Allowance at 1 January 2018 1,243 4,645 5,888 New assets originated or purchased 14 – 14 Assets derecognized/(repaid) (940) – (940)

Changes in allowance (291) – (291)

Allowance at 30 June 2018 (unaudited) 26 4,645 4,671

Assets derecognized/(repaid) (16) – (16)

Changes in allowance (2) – (2)

Allowance at 30 September 2018 (unaudited) 8 4,645 4,653

Promissory notes The following tables show the analysis of changes in the gross carrying amount and the corresponding provisions for promissory notes:



22

Stage 1 Collective

Gross carrying amount at 1 January 2019 74,717 New assets originated or purchased 112,909 Assets derecognized/(repaid) (119,506)

Change in carrying amount 5,279

Gross carrying amount at 30 June 2019 (unaudited) 73,399

New assets originated or purchased 78,728 Assets derecognized/(repaid) (96,009)


Gross carrying amount at 30 September 2019 (unaudited) 58,010

Stage 1

Collective Gross carrying amount at 1 January 2018 52,614 New assets originated or purchased 95,219 Assets derecognized/(repaid) (81,743)


Gross carrying amount at 30 June 2018 (unaudited) 67,183

New assets originated or purchased 72,950 Assets derecognized/(repaid) (66,093)

Change in carrying amount 44


Stage 1

Collective Allowance at 1 January 2019 963 New assets originated or purchased 1,194 Assets derecognized/(repaid) (1,269)

Changes in allowance (8)

Allowance at 30 June 2019 (unaudited) 880

New assets originated or purchased 979 Assets derecognized/(repaid) (1,090)

Changes in allowance 13

Allowance at 30 September 2019 (unaudited) 782

Stage 1

Collective Allowance at 1 January 2018 767 New assets originated or purchased 1,206 Assets derecognized/(repaid) (1,028)

Changes in allowance 84

Allowance at 30 June 2018 (unaudited) 1,029

New assets originated or purchased 1,067

Assets derecognized/(repaid) (1,020)

Allowance at 30 September 2018 (unaudited) 1,076



23

Modified loans The Bank derecognises a financial asset when the terms and conditions have been renegotiated to the extent that, substantially, it becomes a new loan, with the difference recognised as a derecognition gain or loss, to the extent that an impairment loss has not already been recorded. The newly recognised loans are classified as Stage 1 for ECL measurement purposes, unless the new loan is deemed to be POCI.

If the modification does not result in derecognition, then, based on the change in cash flows discounted at the original EIR, the Bank records a modification gain or loss, to the extent that an impairment loss has not already been recorded.

The table below includes the Stage 2 and Stage 3 assets modified during the period, with the related modification gain or loss.


2019 2018

(unaudited)

Loans to customers modified during the period Amortised cost before modification 12,185,605 17,669,903

Net modification losses (46,643) (565,893)

9. Investment securities

Investment securities at fair value through profit or loss

As at 30 September 2019, investment securities at FVPL with the carrying value of UAH 25,398,723 thousand (31 December 2018: UAH 26,653,561 thousand) are represented by Ukrainian state bonds. The conditions of issue of those securities provide for indexation of the nominal value by maturity according to the changes in the average interbank exchange rate of Hryvnia to US Dollar per month prior to the date of issue and per month prior to the maturity date. Coupon yield is not subject to indexation.

Investment securities at fair value through other comprehensive income

30 September 2019

(unaudited) 31 December

2018

Ukrainian state bonds 21,019,621 34,371,218 Corporate bonds 1,378,716 1,401,274

Corporate shares 17,897 16,603

Investment securities at fair value through other comprehensive income 22,416,234 35,789,095

The following tables show the analysis of changes in the gross carrying amount and the corresponding ECL on investment securities at fair value through other comprehensive income: Stage 1

Collective Stage 3

Individual Total Gross carrying amount at 1 January 2019 35,794,632 4,218,021 40,012,653 New assets originated or purchased 7,063,578 − 7,063,578 Assets derecognized/(repaid) (9,387,744) − (9,387,744) Change in carrying amount (92,893) − (92,893) Translation differences (1,117,776) − (1,117,776)

Gross carrying amount at 30 June 2019 (unaudited) 32,259,797 4,218,021 36,477,818

New assets originated or purchased 3,012,932 − 3,012,932 Assets derecognized/(repaid) (11,913,450) − (11,913,450) Change in carrying amount 430,284 − 430,284 Translation differences (1,370,284) − (1,370,284)

Gross carrying amount at 30 September 2019 (unaudited) 22,419,279 4,218,021 26,637,300



24

Stage 1 Collective

Stage 3 Individual Total

Gross carrying amount at 1 January 2018 48,254,711 4,218,021 52,472,732 New assets originated or purchased 20,241,457 − 20,241,457 Assets derecognized/(repaid) (24,336,404) − (24,336,404) Change in carrying amount (678,112) − (678,112) Translation differences (2,495,245) − (2,495,245)

Gross carrying amount at 30 June 2018 (unaudited) 40,986,407 4,218,021 45,204,428

New assets originated or purchased 2,258,289 − 2,258,289 Assets derecognized/(repaid) (4,365,032) − (4,365,032) Change in carrying amount (169,389) − (169,389) Translation differences 2,438,688 2,438,688

Gross carrying amount at 30 September 2018 (unaudited) 41,148,963 4,218,021 45,366 ,984

Stage 1

Collective Stage 3

Individual Total Allowance at 1 January 2019 5,537 4,218,021 4,223,558 Changes in allowance (1,046) − (1,046)

Allowance at 30 June 2019 (unaudited) 4,491 4,218,021 4,222,512

Changes in allowance (1,446) − (1,446)

Allowance at 30 September 2019 (unaudited) 3,045 4,218,021 4,221,066

Stage 1

Collective Stage 3

Individual Total Allowance at 1 January 2018 7,374 4,218,021 4,225,395 Changes in allowance (278) − (278)

Allowance at 30 June 2018 (unaudited) 7,096 4,218,021 4,225,117

Changes in allowance (331) − (331)

Allowance at 30 September 2018 (unaudited) 6,765 4,218,021 4,224,786

10. Other assets and liabilities Other assets comprise:

30 September 2019


2018 Other financial assets Other accrued income 334,980 363,981 Transit accounts on operations with payment cards 172,302 169,002 Accounts receivable on operations with customers 56,927 64,987 Accrued service fee on financial guarantees issued 17,256 18,804

Other 106 122

581,571 616,896

Less: allowance for impairment (387,992) (389,595)

Other financial assets 193,579 227,301

Other assets Other tax assets, except those related to income tax 149,678 463,496 Advance payments 128,275 1,688,710 Precious metals 72,376 83,634 Inventories 35,693 32,743 Cash, which availability is not confirmed 30,824 34,855

Other 2,443 3,017

419,289 2,306,455



25

30 September 2019


2018

Less: allowance for impairment (93,143) (82,233)

Other assets 326,146 2,224,222

Total other assets 519,725 2,451,523

Other liabilities comprise:

30 September 2019


2018 Other financial liabilities Transit accounts on operations with customers 62,563 31,643 Transit accounts on operations with payment cards 37,279 29,771 Liabilities on financial guarantees issued 7,348 8,756 Lease liabilities 7,324 −

Accrued expenses 3,381 6,481

Other financial liabilities 117,895 76,651

Other liabilities Accrued unused vacations 115,502 111,952 Payables to the Individual Deposit Guarantee Fund 63,514 64,542 Payables on taxes and mandatory contributions, except for income tax 38,871 38,040 Deferred income 31,420 27,329 Accrued salary 24,619 71,727 Payables on the Bank’s business activities 12,377 22,627 Deductions from salary 7,389 135 Accrued pension contributions 1,534 1,800

Other 7,291 8,820

Other liabilities 302,517 346,972

Total other liabilities 420,412 423,623

The following tables show the analysis of changes in the gross carrying amount and the corresponding ECL on other financial assets (except for transit accounts on operations with payment cards):

Stage 1

Collective

Gross carrying amount at 1 January 2019 447,894 New assets originated or purchased 36,865 Assets derecognized/(repaid) (44,536) Change in carrying amount (27,745) Written-off assets (121)

Translation differences (2,416)

Gross carrying amount at 30 June 2019 (unaudited) 409,941 New assets originated or purchased 29,844 Assets derecognized/(repaid) (26,083) Change in carrying amount (657) Written-off assets (41)



Stage 1

Collective Gross carrying amount at 1 January 2018 553,780 New assets originated or purchased 63,313 Assets derecognized/(repaid) (164,895) Change in carrying amount (3,184)


Gross carrying amount at 30 June 2018 (unaudited) 445,502 New assets originated or purchased 9,476



26

Stage 1

Collective Assets derecognized/(repaid) (8,858) Change in carrying amount 1,193

Translation differences 3,256


Stage 1

Collective Allowance at 1 January 2019 389,595 New assets originated or purchased 5,932 Assets derecognized/(repaid) (4,678) Changes in allowance 2,823 Written-off assets (121)


Allowance at 31 June 2019 (unaudited) 391,044 New assets originated or purchased 3,013 Assets derecognized/(repaid) (2,789) Changes in allowance 474 Written-off assets (41)



Stage 1

Collective Allowance at 1 January 2018 466,342 New assets originated or purchased 2,901 Assets derecognized/(repaid) (6,827) Transfer to POCI (109,304) Changes in allowance (6,954)


Allowance at 30 June 2018 (unaudited) 340,532 New assets originated or purchased 1,057 Assets derecognized/(repaid) (2,971) Changes in allowance 149



The following tables show the analysis of impairment losses on other non-financial assets:

Allowance at 1 January 2019 82,233

Charge 13,956



Charge 867



Allowance at 1 January 2018 73,005

Charge 2,709

Translation differences 29


Charge 1,534





27

11. Amounts due to credit institutions Amounts due to credit institutions comprise:


Current accounts Ukrainian banks 1,128,645 1,611,668

CIS and other banks 2,664 474

1,131,309 1,612,142

Loans and deposits International financial institutions 21,638,590 22,475,335 OECD banks 86,488 231,162

Ukrainian banks 83,568 87,273

21,808,646 22,793,770

Other amounts due to credit institutions − 1

Amounts due to credit institutions 22,939,955 24,405,913

For the purposes of the consolidated cash flow statement presentation, the Bank allocates the funds attracted from credit institutions between the operating and financing activities. The funds raised from Ukrainian banks comprise guarantee deposits taken and were included in the category of funds for operating activities, and the funds from foreign banks received for longer-term purposes – for financing activities.

12. Amounts due to customers Amounts due to customers comprise:

30 September 2019


2018

Current accounts - Legal entities 16,766,102 18,106,953 - Budget financed organizations 8,386,464 6,592,570 - Individuals 3,910,619 4,110,000

- Funds under the Bank’s management 1 1

29,063,186 28,809,524

Time deposits - Legal entities 26,732,192 31,235,635 - Individuals 21,112,984 22,117,965

- Budget financed organizations 1,687,967 –

49,533,143 53,353,600

Amounts due to customers 78,596,329 82,163,124

Held as security against loans to customers 923,496 1,152,540 Held as security against letters of credit (Note 15) 902,185 1,020,095 Held as security against guarantees and avals (Note 15) 664,262 899,741 Held as security against undrawn loan commitments (Note 15) 3,990 12,800 As at 30 September 2019, amounts due from customers are designated at amortised cost (31 December 2018: at amortised cost), except for attracted deposits and current accounts in gold in the amount of UAH 53,578 thousand (31 December 2018: UAH 66,045 thousand) at fair value through profit or loss (31 December 2018: at fair value through profit or loss).

13. Eurobonds issued


Nominal value (‘000)

Currency

Carrying amount

Nominal value (‘000)

Currency

Carrying amount

April 2010 issue 500,000 USD 6,250 091 500,000 USD 14,044,589 October 2010 issue 250,000 USD 3,125 045 250,000 USD 7,022,294 January 2013 issue 500,000 USD 12,203 642 500,000 USD 14,355,526 April 2013 issue 100,000 USD 2,440 728 100,000 USD 2,871,105 March 2018 issue 4,051,000 UAH 4,086,448 4,051,000 UAH 4,248,391

Eurobonds issued 28,105,954 42,541,905



28

14. Equity As at 30 September 2019, the Bank’s authorised issued share capital comprised 26,490,412 (31 December 2018: 26,490,412) ordinary registered shares with a nominal value of UAH 1,462.04 per share (31 December 2018: 1,462.04 per share). As at 30 September 2019, 26,490,412 ordinary registered shares were fully paid and registered (31 December 2018: all shares were fully paid and registered). Movements in revaluation reserves Movements in revaluation reserves were as follows:

Property revaluation

reserve

Unrealised gains/ (losses) on investment securities at fair value

through other comprehensive

income Revaluation reserves

At 1 January 2018 724,063 (512,280) 211,783

Depreciation of revaluation reserve, net of tax (9,948) − (9,948) Other comprehensive loss to be subsequently reclassified

to the consolidated statement of profit and loss Net loss on investment securities at fair value through

other comprehensive income, including: − (929,750) (929,750) Reversal of expenses for expected credit losses on investment securities at fair value through other comprehensive income − 610 610 Net loss on investment securities at fair value through other comprehensive income reclassified to the consolidated statement of profit and loss (consolidated statement of income) − 50,083 50,083 Net unrealised losses on investment securities at fair value through other comprehensive income − (980,443) (980,443) Income tax related to components of other comprehensive income − − −

At 30 September 2018 (unaudited) 714,115 (1,442,030) (727,915)

At 31 December 2018 710,805 (1,527,211) (816,406)

Depreciation of revaluation reserve, net of tax (9,928) − (9,928) Other comprehensive loss to be subsequently reclassified to the consolidated statement of profit and loss

Net income on investment securities at fair value through other comprehensive income, including: − 32,975 32,975 Reversal of expenses for expected credit losses on investment securities at fair value through other comprehensive income − 2,492 2,492 Net realised loss on investment securities at fair value through other comprehensive income reclassified to the consolidated statement of profit and loss (consolidated income statement) − 7,208 7,208 Net unrealised gains on investment securities at fair value through other comprehensive income − 23,275 23,275 Income tax related to components of other comprehensive income − − −

At 30 September 2019 (unaudited) 700,877 (1,494,236) (793,359)

15. Credit-related commitments Credit-related commitments included:

30 September 2019


2018

Undrawn loan commitments 7,478,493 5,588,762 Guarantees 3,901,038 4,166,892 Letters of credit 941,783 1,080,298

Avals on promissory notes 489,072 349,446

12,810,386 11,185,398



29

30 September 2019


2018

Less: provisions (124,472) (72,625)

Credit-related commitments (before cash held as security) 12,685,914 11,112,773

Less: cash held as security against letters of credit, avals, guarantees and undrawn loan commitments (Notes 12) (1,570,437) (1,932,636)

Credit-related commitments 11,115,477 9,180,137

The following tables show the analysis of changes in credit-related commitments and the corresponding provisions: Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective Total

Credit-related commitments at 1 January 2019 5,475,800

− 6,664 100,069 6,229 5,588,762 New liabilities originated or purchased 4,263,992 − − − − 4,263,992

Liabilities derecognized/(repaid) (3,411,370) − (14,147) (22,581) (5,182) (3,453,280) Transfer to Stage 1 2,639 − (2,316) − (323) − Transfer to Stage 2 (468,144) 453,799 14,345 − − − Transfer to Stage 3 (4,805) − (614) 4,449 970 −

Changes in carrying amount 513,100 64,684 1,564 (80,974) (61) 498,313

Translation differences (154,558) − (100) − − (154,658)

Credit-related commitments at 30 June 2019 (unaudited) 6,216,654 518,483 5,396 963 1,633 6,743,129

New liabilities originated or purchased 2,870,899 − − − − 2,870,899

Liabilities derecognized/(repaid) (1,618,949) − (5,730) (952) (606) (1,626,237) Transfer to Stage 1 913 − (847) − (66) − Transfer to Stage 2 (6,054) − 6,054 − − − Transfer to Stage 3 (730) (518,483) (268) 518,483 998 −

Changes in carrying amount (376,336) − 7,079 98,557 265 (270,435)


Credit-related commitments at 30 September 2019 (unaudited) 6,847,543 − 11,675 617,051 2,224 7,478,493

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective Total

Credit-related commitments at 1 January 2018 3,415,214 − 18,805

− 397 3,434,416 New liabilities originated or purchased 3,625,855 − − − − 3,625,855

Liabilities derecognized/(repaid) (1,705,130) − (19,136) − (128) (1,724,394) Transfer to Stage 1 83,040 (542) (82,316) − (182) − Transfer to Stage 2 (115,640) 5,838 109,802 − − − Transfer to Stage 3 (1,750) − (266) 886 1,130 −

Changes in carrying amount 485,614 (5,015) (9,526) − 39,570 510,643


Credit-related commitments at 30 June 2018 (unaudited) 5,724,428 281 17,307 886 40,787 5,783,689

New liabilities originated or purchased 2,918,515 − − − − 2,918,515

Liabilities derecognized/(repaid) (1,559,914) (281) (787) (509) (40,092) (1,601,583) Transfer to Stage 1 502 − (363) − (139) − Transfer to Stage 2 (16,279) 15,568 1 088 (377) − − Transfer to Stage 3 (303) − (6,137) − 6,440 −

Changes in carrying amount (1,292,108) (2,830) (358) − (2,142) (1,297,438)

Translation differences 135,963 − 68 − − 136,031

Credit-related commitments at 30 September 2018 (unaudited) 5,910,804 12,738 10,818 − 4,854 5,939,214



30

Stage 1

Collective

Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective Total

Provision of credit-related commitments at 1 January 2019 61,657

− 91 3,981 2,956 68,685 New liabilities originated or

purchased 76,813 − − − − 76,813 Liabilities derecognized/(repaid) (45,902) − (144) (1,450) (2,345) (49,841)


Transfer to Stage 2 (8,316) 8,182 134 − − −

Transfer to Stage 3 (255) − (70) 87 238 −

Changes in allowance (34,723) (8,182) 118 (2,618) 127 (45,278)

Translation differences (1,792) − − − − (1,792)

Provision of credit-related commitments at 30 June 2019 (unaudited) 47,711 − 109 − 767 48,587

New liabilities originated or purchased 52,579 − − − − 52,579

Liabilities derecognized/(repaid) (15,420) − (96) − (312) (15,828)


Transfer to Stage 2 (123) − 123 − − −

Transfer to Stage 3 (37) − (39) − 76 −

Changes in allowance (11,784) − 151 50,188 89 38,644

Translation differences (2,280) − − − − (2,280)

Provision of credit-related commitments at 30 September 2019 (unaudited) 70,694 − 232 50,188 588 121,702

Stage 1

Collective Stage 2

Individual Stage 2

Collective Stage 3

Individual Stage 3

Collective Усього

Provision of credit-related commitments

at 1 January 2018 44,067

− 408

− 233 44,708 New liabilities originated or purchased 48,962 − − − − 48,962 Liabilities derecognized/(repaid) (24,119) − (386) − (65) (24,570)


Transfer to Stage 2 (142) − 142 − − −

Transfer to Stage 3 (311) − (76) 56 331 −

Changes in allowance (12,526) − 1,296 − 11,500 270

Translation differences (1,539) − − − 15,944 14,405


at 30 June 2018 (unaudited) 54,552 − 1,337 56 27,,830 83,775

New liabilities originated or purchased 80,289 − − − − 80,289 Liabilities derecognized/(repaid) (22,858) − (69) − (27,472) (50,399)


Transfer to Stage 2 (2,565) 2,543 78 (56) − −

Transfer to Stage 3 (57) − (1,228) − 1,285 −

Changes in allowance (12,843) (2,543) − − 636 (14,750)

Translation differences 1,035 − − − − 1,035


at 30 September 2018 (unaudited) 97,643 − 112 − 2,195 99,950

The following tables show the analysis of changes in the letters of credit (except for security accounts) and the corresponding provisions:



31

Stage 1 Collective

Letters of credit at 1 January 2019 60,204 New created or purchased letters of credit 12,133 Changes in letters of credit (11,491)


Letters of credit at 30 June 2019 (unaudited) 57,006

New created or purchased letters of credit 6,948 Expired (redeemed) letters of credit (15,092) Changes in letters of credit (3,917)


Letters of credit at 30 September 2019 (unaudited) 39,598

Stage 1

Collective

Letters of credit at 1 January 2018 20,349 New created or purchased letters of credit 74,500 Expired (redeemed) letters of credit (19,244) Translation differences (5,971)

Letters of credit at 30 June 2018 (unaudited) 69,634

Changes in letters of credit (4,928) Translation differences 5,833

Letters of credit at 30 September 2018 (unaudited) 70,539

Stage 1

Collective Provision for letters of credit at 1 January 2019 2,360 New created or purchased letters of credit 58 Changes in allowance (1,173)

Translation differences (125)

Provision for letters of credit at 30 June 2019 (unaudited) 1,120

New created or purchased letters of credit 3 Expired (redeemed) letters of credit (52) Changes in allowance (126)

Translation differences (124)

Provision for letters of credit at 30 September 2019 (unaudited) 821

Stage 1 Collective

Provision for letters of credit at 1 January 2018 − New created or purchased letters of credit 2,993 Changes in allowance 239 Translation differences (293)

Provision for letters of credit at 30 June 2018 (unaudited) 2,939



Provision for letters of credit at 30 September 2018 (unaudited) 2,985

The following tables show the analysis of changes in avals and corresponding provisions:



32

Stage 1 Collective

Avals at 1 January 2019 349,446 New created or purchased avals 885,138 Avals derecognized/(repaid) (420,623)

Changes in avals (374,604)

Avals at 30 June 2019 (unaudited) 439,357

New created or purchased avals 327,290 Avals derecognized/(repaid) (212,165)

Changes in avals (65,410)

Avals at 30 September 2019 (unaudited) 489,072

Stage 1

Collective Avals at 1 January 2018 333,227 New created or purchased avals 1,028,606 Avals derecognized/(repaid) (653,419)

Avals at 30 June 2018 (unaudited) 708,414

New created or purchased avals 216,556

Avals derecognized/(repaid) (519,469)

Avals at 30 September 2018 (unaudited) 405,501

Stage 1 Collective

Provision for avals at 1 January 2019 30 New created or purchased avals 80 Avals derecognized/(repaid) (29) Changes in allowance (45)

Provision for avals at 30 June 2019 (unaudited) 36

New created or purchased avals 23 Avals derecognized/(repaid) (19)


Provision for avals at 30 September 2019 (unaudited) 32

Stage 1

Collective Provision for avals at 1 January 2018 27 New created or purchased avals 66

Avals derecognized/(repaid) (50)

Provision for avals at 30 June 2018 (unaudited) 43

New created or purchased avals 21 Avals derecognized/(repaid) (28)

Provision for avals at 30 September 2018 (unaudited) 36

The following tables show the analysis of changes in guarantees and corresponding provisions: Stage 1

Collective Stage 2

Collective Stage 3

Collective Total Guarantees at 1 January 2019 3,936,567 66,467 163,858 4,166,892 New created or purchased guarantees 928,575 − − 928,575 Guarantees derecognised or repaid (941,158) (3,367) − (944,525) Transfer to Stage 1 2,585 (2,585) − − Transfer to Stage 2 (23,254) 23,254 − − Transfer to Stage 3 − (13,496) 13,496 −



33

Stage 1 Collective

Stage 2 Collective


Changes in guarantees (181,214) (14,547) − (195,761)

Translation differences (127,433) (545) (10,663) (138,641)

Guarantees at 30 June 2019 (unaudited) 3,594,668 55,181 166,691 3,816,540

New created or purchased guarantees 667,669 − − 667,669 Guarantees derecognised or repaid (252,982) − − (252,982) Changes in guarantees (117,874) (4,720) − (122,594)

Translation differences (188,800) (208) (18,587) (207,595)

Guarantees at 30 September 2019 (unaudited) 3,702,681 50,253 148,104 3,901,038

Stage 1

Collective Stage 2

Collective Total Guarantees at 1 January 2018 2,809,454 236,353 3,045,807 New created or purchased guarantees 627,827 − 627,827 Guarantees derecognised or repaid (709,002) (59,321) (768,323) Transfer to Stage 1 11,500 (11,500) − Transfer to Stage 2 (11,500) 11,500 − Changes in guarantees (76,028) − (76,028)

Translation differences (120,228) (16,477) (136,705)

Guarantees at 30 June 2018 (unaudited) 2,532,023 160,555 2,692,578

New created or purchased guarantees 444,251 − 444,251 Guarantees derecognised or repaid (238,670) − (238,670) Changes in guarantees (18,786) − (18,786)

Translation differences 123,519 13,442 136,961

Guarantees at 30 September 2018 (unaudited) 2,842,337 173,997 3,016,334

Stage 1

Collective Stage 2

Collective Stage 3

Collective Total Provision for guarantees at 1 January 2019 1,546 4

− 1,550

New created or purchased guarantees 529 − − 529 Derecognised (repaid) guarantees (123) − − (123) Transfer to Stage 2 (19) 19 − − Transfer to Stage 3 − (49) 49 − Changes in allowance (730) 40 833 143

Translation differences (33) (1) (35) (69)

Provision for guarantees at 30 June 2018 (unaudited) 1,170 13 847 2,030

New created or purchased guarantees 275 − − 275 Derecognised (repaid) guarantees (111) − − (111) Changes in allowance (174) (2) − (176)

Translation differences (34) − (67) (101)

Provision for guarantees at 30 September 2019 (unaudited) 1,126 11 780 1,917

Stage 1

Collective Provision for guarantees at 1 January 2018 575 New created or purchased guarantees 940 Derecognised (repaid) guarantees (112) Changes in allowance (88) Translation differences (74)

Provision for guarantees at 30 June 2018 (unaudited) 1,241



34

Stage 1 Collective

New created or purchased guarantees 72 Derecognised (repaid) guarantees (61) Changes in allowance 1


Provision for guarantees at 30 September 2018 (unaudited) 1,300

16. Personnel and other operating expenses Personnel and other operating expenses comprise: 2019 2018





(unaudited)

Salaries and bonuses 334,361 911,201 277,306 764,518

Mandatory contributions to the state funds 55,084 163,347 49,299 152,551

Personnel expenses 389,445 1,074,548 326,605 917,069

Payables to the Individual Deposit Guarantee Fund 63,513 192,364 62,782 182,427 Repair and maintenance of property and equipment 34,696 96,406 33,799 91,233 Security 13,379 41,398 12,574 36,794 Operating taxes 9,155 31,474 14,880 37,010 Maintenance of premises 8,856 31,523 7,790 30,015 Electronic and data processing costs 7,217 22,280 9,458 23,287 Expenses for cash collection 5,100 15,511 6,003 16,699 Administrative expenses 4,723 14,665 5,774 15,652 Communication services 4,017 11,846 3,633 10,510 Rent of premises 3,715 10,704 5,303 16,203 Charity 3,684 5,082 860 2,623 Business travel and related expenses 2,419 6,392 1,218 4,211 Marketing and advertising 1,570 5,947 1,370 1,733 Legal and advisory services 1,533 10,655 4,302 12,097 Representative offices expenses 1,122 2,731 1,172 2,924 Net losses from impairment of non-financial assets 867 14,823 1,534 4,243

Other 14,589 33,375 9,360 30,093

Other operating expenses 180,155 547,176 181,812 517,754

Expenses for contributions to the non-state pension fund for the period ended 30 September 2019 comprised UAH 17,063 thousand (30 September 2018: UAH 13,878 thousand).

17. Fair value of assets and liabilities Fair value of financial assets and financial liabilities not carried at fair value Set out below is a comparison by class of the carrying amounts and fair values of the Bank’s financial instruments that are not carried at fair value in the interim condensed consolidated statement of financial position. The table does not include the fair values of non-financial assets and non-financial liabilities.



35

30 September 2019


Carrying amount Fair value

Unrecognised gain/(loss)

Carrying amount Fair value

Unrecognised gain/(loss)

Financial assets Cash and cash equivalents 26,617,536 26,617,536 − 18,545,858 18,545,858 − Amounts due from other banks 268,705 268,705 − 438,205 438,205 − Loans to customers 62,842,960 60,145,480 (2,697,480) 72,496,358 69,630,486 (2,865,872) Securities at amortised cost − − − 49,855 49,104 (751) Other assets 193,579 193,579 − 227,301 227,301 − Financial liabilities Amounts due to other banks 22,939,955 22,939,955 − 24,405,913 24,405,913 − Amounts due to customers 78,542,751 78,484,087 58,664 82,097,079 82,081,788 15,291 Eurobonds issued 28,105,954 29,680,730 (1,574,776) 42,541,905 41,262,680 1,279,225 Subordinated debt 3,045,476 3,084,245 (38,769) 3,584,690 3,448,469 136,221

Other liabilities 117,895 117,895 − 76,651 76,651 −

Total unrecognised change in unrealised fair value (4,252,361) (1,435,886)

The following describes the methodologies and assumptions used to determine fair values for the financial instruments that are not recorded at fair value in the interim condensed consolidated statement of financial position. Assets, fair value of which approximates their carrying value For the financial assets and financial liabilities that are liquid or have a short-term maturity (less than three months), it is assumed that their carrying values approximate their fair values. This assumption is also applied to demand deposits, savings accounts without a specific maturity and variable rate financial instruments. Fixed rate financial instruments The fair values of fixed rate financial assets and financial liabilities carried at amortised cost are estimated by comparing the market interest rates at the date when they were first recognised with the current market rates offered for similar financial instruments. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using the prevailing money-market interest rates for debts with similar credit risk and maturity. For listed debt issued the fair values are calculated based on quoted market prices. For listed securities issued where quoted market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve appropriate for the remaining term to maturity. Fair value of financial assets carried at fair value The Bank uses the following hierarchy of measurement techniques to determine and disclose fair values of financial assets, including changes in fair value as a result of alternative assumptions used in the measurement model:

► Level 2: where no market quotations are available for a financial instrument, the fair value is measured using valuation techniques based on assumptions supported by observable market prices and rates available at the reporting date, i.e. either directly or indirectly based on observable market inputs;

► Level 3: for financial instruments whose fair values cannot be measured using market quotations or measurement models with observable inputs, the Bank uses measurement techniques using unobservable inputs that have material impact on reported fair values of financial instruments. This approach is appropriate for investments in non-listed shares and debt securities.



36

Analysis of financial instruments measured at fair value by level in the fair value hierarchy is presented in the table below:

Fair value

recurring measurements Level 2 Level 3 Total At 30 September 2019 (unaudited) Current accounts with other credit institutions in precious metals 9,642 − 9,642 Investment securities at fair value through profit or loss 25,398,723 − 25,398,723 Investment securities at fair value through other comprehensive income 22,398,337 17,897 22,416,234

Total assets 47,806,702 17,897 47,824,599

Amounts due to customers in precious metals 53,578 − 53,578

Total liabilities 53,578 − 53,578

Fair value

recurring measurements Level 2 Level 3 Total At 31 December 2018 Current accounts with other credit institutions in precious metals 131,685 – 131,685 Investment securities at fair value through profit or loss 26,653,561 – 26,653,561 Investment securities at fair value through other comprehensive income 35,772,492 16,603 35,789,095

Total assets 62,557,738 16,603 62,574,341

Amounts due to customers in precious metals 66,045 – 66,045

Total liabilities 66,045 – 66,045

The Bank assesses whether any transfers between levels of the fair value hierarchy are required at the end of each reporting period. During nine months ended 30 September 2019, the Bank did not transfer any financial assets from one level of the fair value hierarchy to another level of the fair value hierarch. The Bank measures financial assets by discounting cash flows from these instruments using the rates determined on the basis of non-observable data. Movements in Level 3 assets measured at fair value The following table shows a reconciliation of the opening and closing amounts of Level 3 assets and liabilities recorded at fair value:

At 1 January

2019

Gain recognised in the interim

condensed consolidated

statement of profit and loss


condensed consolidated statement of

comprehensive income Settlements

At 30 September 2019 (unaudited)

Investment securities at fair value through other comprehensive income 16,603 394 1,294 (394) 17,897

Total assets 16,603 394 1,294 (394) 17,897



37

At 1 January

2018

Total gain recorded in

interim condensed

consolidated statement of profit

and loss


condensed consolidated statement of

comprehensive income Settlements


Investment securities at fair value through other comprehensive income 15,097 560 1,113 (560) 16,210

Total assets 15,097 560 1,113 (560) 16,210

The table below shows the quantitative information as at 30 September 2019 about significant unobservable inputs used for fair valuation of the assets classified as those of Level 3 of the fair value hierarchy: At 30 September 2019 (unaudited)

Carrying amount

Valuation technique

Unobservable parameter

Range of parameter values


17,897 Discounted cash flows

Risk factor Corporate: 0-1.0


Carrying amount

Valuation technique

Unobservable parameter

Range of parameter values


16,210 Discounted cash flows

Risk factor Corporate: 0-1.0

18. Related party disclosures In accordance with IAS 24 Related Party Disclosures, parties are considered to be related if they are under common control, or one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Related parties may enter into the transactions, which unrelated parties might not. The terms and conditions of such transactions may differ from those between unrelated parties. Transactions and balances with related parties comprise transactions with entities controlled, directly or indirectly, or significantly influenced by the Ukrainian Government and with the key management personnel. The outstanding balances with the key management personnel as at 30 September 2019 and 31 December 2018 and the related income and expense for the nine months ended 30 September 2019 and 2018 are as follows:


Key management personnel

Loans to customers 11 429

Less: Allowance for impairment − (6)

Loans to customers 11 423

Other assets 5 −

Current accounts 14,187 11,181

Time deposits 20,765 13,160

Amounts due to customers 34,952 24,341

Other liabilities 29 5




38

2019 2018

(unaudited)

Interest income on loans 21 22

Interest expense on customer deposits (870) (509) Commission income 12 12 Translation differences 3,982 (942) During the six months ended 30 September 2019, the total compensation and other remunerations of the key management personnel comprised UAH 42,675 thousand. (UAH 673 thousand of payments to the non-state pension fund) (30 September 2018: UAH 31,115 thousand) (UAH 418 thousand of payments to the non-state pension fund)). In the normal course of business, the Bank enters into contractual agreements with the Government of Ukraine and entities controlled, either directly or indirectly, or significantly influenced by the state. The Bank provides such enterprises with a full range of banking service including, but not limited to, lending, deposit-taking, issue of guarantees, transactions with securities, cash and settlement transactions. Balances with government-related entities which are individually significant in terms of the carrying value as at 30 September 2019 (unaudited) are disclosed below:

Client Sector Cash and cash

equivalents Loans to

customers Amounts due to

customers Guarantees

issued

Client 1 State entities − − 4,523,160 − Client 2 State entities − − 1,430,247 − Client 3 State entities − − 725,075 − Client 4 Agriculture and food industry − − 12,098,740 − Client 5 Agriculture and food industry − 769,561 − − Client 6 Extractive industry − 9,284,438 744,656 − Client 7 Extractive industry − 1,861,247 − − Client 8 Power engineering − 4,968,576 1,175,183 − Client 9 Finance 4,984,273 − − − Client 10 Trade − − 1,825,122 458,130 Client 11 Trade − − − 579,730 Client 12 Trade − − − 48,792 Client 13 Mechanical engineering − 2,133,442 − 528,418 Client 14 Mechanical engineering − − − 177,882 Client 15 Transport and communications − 2,388,031 − − Client 16 Professional, scientific and technical

activities − 755,028 − − Other − − 898,517 7,476,399 42,095 Balances with government-related entities which are individually significant in terms of the carrying value as at 31 December 2018 are disclosed below:




customers

Amounts due to credit

institutions Guarantees

issued Client 1

State entities − − 3,074,872 − −

Client 2 State entities − − 1,695,382 − − Client 4 Agriculture and food

industry − − 17,149,604 − − Client 5 Agriculture and food

industry − 1,452,146 − − − Client 6 Extractive industry − 14,301,076 790,050 − − Client 7 Extractive industry − 2,162,457 997,126 − − Client 8 Power engineering − 6,886,921 1,524,272 − − Client 9 Finance 2,952,279 − − − − Client 17 Finance − − − 452,367 −

Client 13 Mechanical engineering − 2,453,169 − − 469,462

Client 14 Mechanical engineering − − − − 196,526

Client 10 Trade − − 1,452,994 − 777,844



39




customers

Amounts due to credit

institutions Guarantees

issued Client 11 Trade − − − − 714,369 Client 12 Trade − − − − 84,490

Client 15 Transport and communications − 1,302,138 564,863 − −

Other − − 864,381 6,635,272 − −

For the nine-month period ended 30 September 2019, the Bank recorded UAH 1,782,915 thousand on significant transactions with the state-controlled entities (30 September 2018: 2,188,486 thousand) of interest income, including interest income from operations with the NBU deposit certificates with maturity up to 90 days – UAH 46,919 thousand. (30 September 2018: UAH 37,246 thousand), and interest expense of UAH 973,138 thousand (30 September 2018: UAH 1,007,731 thousand). As at 30 September 2019 and 31 December 2018, the Bank’s investments in debt securities issued by the government or the government-related corporate entities were as follows:

30 September 2019 (unaudited)

31 December 2018

Investment securities at fair value through profit or loss 25,398,723 26,653,561 Investment securities at fair value through other comprehensive income 22,411,537 35,784,441 For the nine-month period ended 30 September 2019, the Bank recognised UAH 2,591,970 thousand on transactions with the State bonds (30 September 2018: UAH 2,958,713 thousand) of interest income, on transactions with other investment securities, UAH 193,854 thousand (30 September 2018: UAH 198,628 thousand) of interest income.

19. Capital adequacy The Bank extensively manages its capital adequacy for protection from risks inherent in the business. The adequacy of the Bank's capital is monitored using the ratios established by the NBU and Basel Capital Accord 1988. The primary objectives of the Bank's capital management are to ensure that the Bank complies with the externally imposed capital requirements and maintains strong credit ratings and proper capital ratios in order to support its business activities and maximise the value to the shareholder. The Bank manages its capital structure and adjusts its total assets to provide for observed and expected changes in the business environment and the risk profile of its business activities. NBU capital adequacy ratio The Bank’s regulatory capital adequacy ratio was as follows:

30 September 2019


2018

Main capital 7,263,828 7,266,802 Additional capital, calculated 4,573,349 3,880,435 Additional capital, included in calculation of total capital (limited to main capital) 4,573,349 3,880,435

Total regulatory capital 11,837,177 11,147,237

Risk weighted assets 76,237,052 87,452,131

Main capital adequacy ratio 9.53% – Regulatory capital adequacy ratio 15.53% 12.75% Starting January 2019, the NBU has implemented the main capital adequacy ratio. The statutory value of the main capital adequacy ratio should be not less than 7%. Regulatory capital comprises Tier 1 capital (Main capital) consisting of paid-in registered share capital plus reserves less expected losses, and Tier 2 capital (Additional capital) consisting of asset revaluation reserve, current profit, subordinated

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